Smuggling around the world: evidence from a structural equation model

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Abstract:

This article uses a Multiple Indicators Multiple Causes (MIMIC) model to analyse the determinants of smuggling. The analysis reveals that higher corruption and a lower rule of law encourage smuggling. Tariffs and trade restrictions are important push factors, while a higher Black Market Premium (BMP) discourages smugglers. Based on the MIMIC estimates, we calculate an index of smuggling which provides a ranking for 54 countries. We find that smuggling is rampant in Cameroon, Pakistan and Kenya while it is least prevalent in Switzerland, Finland and Sweden.

Keywords: C31; H26; H71; K42; MIMIC models; O17; corruption; illegal trade; smuggling; tax burden

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036846.2011.570715

Affiliations: 1: Faculty of Business and Economics, Chair of Economics, esp. Monetary Economics,Dresden University of Technology, Dresden01062, Germany 2: Faculty of Business and Economics, Chair of Economics, esp. Public Economics,Dresden University of Technology and Centre for European Economic Research (ZEW), Dresden01062, Germany

Publication date: August 1, 2012

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